English for Economists

G.Even the profits made by a natural monopoly will be temporary, because they are an incentive for entrepreneurs to discover and implement new lowcost technologies.

H.For example, although entrepreneurs introduce new products and techniques and open up new markets, their profits are soon competed away by rivals.

I.it is right that inventors should be granted a temporary monopoly as a reward for innovation or discovery.

J.monopolists are always able to make excessive profits.

КSome people even argue that monopolies are always temporary and consequently not a problem.

L.The arguments against market concentration, or at least against monopoly, are obvious…

M.The only common argument in favour of monopoly concerns patents…

TRANSLATION

A. Translate from English into Russian.

Market

No matter how independent we may be in spirit, virtually none of us is selfsufficient. Our mutual interdependence for goods and services is a fact of life. We rely on others to satisfy our most basic needs. There is an incredibly complex division of labour and specialization in economic activities. Specialized firms and agencies make particular goods and services available to: consumers, investors and governments. Workers specialize in particular trades and occupations and this makes economic interdependence inevitable. The most common way we obtain goods and services is to buythemfromothers whospecialize inproducing them. To makesuch purchases, buyers seek outsellers in markets.

A market is an arrangement through which buyers and sellers meet or communicate for the purpose of trading goods or services. Markets are a way in which buyers and sellers can conduct transactions resulting in mutual net gains that otherwise wouldn't be possible. Many market transactions are conducted without buyers and sellers actually meeting at a particular location. For example, you can browse through catalogues or magazine advertisements to see what various sellers are offering. If you find something you like, you can order it by mail or telephone, without face-to-face contact with the seller. You can also hire an intermediary to carry out a transaction for you.

The purpose of a market is to make information available on the goods and services sellers are willing to sell and buyers want to purchase. This exchange of information is the basis for determining prices which in turn influence the

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actual amount of goods and services exchanged. Prices are a major determinant of the choices we make as both buyers and sellers. Market prices play a vital role in coping with the problem of scarcity because they ration available amounts of goods and services.

To analyze the way markets operate, we first must understand the concept of supply and demand. Supply and demand analysis explains how prices are established in markets through competition among buyers and sellers and how those prices affect quantities traded.

B. Translate from Russian into English.

1.Японские товары имеют репутацию высококачественных.

2.Главная забота отечественных производителей – повышение качества изделий.

3.Производитель гарантирует доставку товара в любую часть страны.

4.Внешний вид изделия имеет большое значение для его конкурентоспособности.

5.Изучение рынка очень важно для успеха в бизнесе.

6.Начиная новое дело, необходимо провести тщательное изучение рынка сбыта товаров и услуг.

7.Многие покупатели оценивают качество товара по его надежности и долговечности.

LISTENING

ListentoKate Barker,aneconomist,talking aboutthecausesofthebusinesscycle.

Ex. 1. Answer the following questions.

1.When Kate Barker talks about the level of companies' investments, does she mean:

a)their financial reserves (deposited in a bank, or invested in treasury bonds, shares in other companies, and so on) or

b)the money they spend on their plant (i.e. factories, and the machines and equipment inside them)?

2.When she talks about the level of companies' stocks, does she mean:

a)their inventories of unsold goods, or

b)the current price of their shares at the stock exchange?

3.According to Kate Barker, what do companies tend to do:

a)when demand is very strong, and

b)when demand weakens a little?

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4.According to the standard theory, when will companies begin to invest again after a downturn, and why?

5.What was the external or exogenous shock that caused the downturns in both the early 1970s and the early 1980s?

6.What were the two factors which led many European business people to invest too much in the late 1980s?

7.What was the exogenous shock that caused the downturn in the early 1990s?

SPEAKING

A. Dwell on the following issues:

1.What are the four basic categories of market structure?

2.What are examples of each basic category of market structure in the American economy?

3.What is monopoly characterized by?

4.What are characteristics of oligopoly?

5.What is monopolistic competition characterized by?

6.Speak about market leaders, challengers and followers.

B. Discussion Points:

1.Which firm is likely to be a price maker, a monopolist or a firm in perfect competition? Why?

2.How might firms in monopolistic competition compete with each other?

3.Why might oligopolists use promotion rather than price changes as the main form of competition?

4.Apart from those mentioned in the text, can you think of two more examples of:

(a)monopolistically competitive industries;

(b)oligopolistic industries?

VOCABULARY

acquisition n – приобретение challenger n – претендент

competition n – конкуренция, соревнование monopolistic ~ – монополистическая конкуренция nonprice ~ – неценовая конкуренция

pure ~ – чистая конкуренция facilities n – средства, оборудование

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follower n – последователь, сторонник growth n – рост, увеличение household n – дом, домашнее хозяйство increase v – увеличивать, расти limited adj – ограниченный

market n – рынок, сбыт monopoly n – монополия oligopoly n – олигополия price n – цена

premium ~ – дополнительная цена pricing n – ценообразование

competitive ~ – конкурентное ценообразование

cost-plus ~ – ценообразование по принципу «издержки плюс прибыль» value ~ –

produce v – производить product n – продукт

differentiated ~ – дифференцированный продукт standardized ~ – стандартный продукт production n – производство

reduce v – уменьшать, снижать reduction n – спад

restriction n – ограничение

artificial ~ – искусственное ограничение standardized adj – стандартный stipulate v – обусловливать

substantial adj – значительный, существенный ~ barrier – существенный барьер

substitute n – заменитель close ~ – близкий заменитель sufficient adj – достаточный

GLOSSARY

·Monopoly is a single seller facing the entire industry demand curve. The monopolist sells a unique product, and extremely high barriers to entry protect it from competition.

·Barriers to entry that prevent new firms from entering an industry are (1) ownership of an essential resource, (2) legal barriers, and (3) economies of scale. Government franchises, licenses, patents, and copyrights are the most obvious legal barriers to entry.

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·Monopolistic competition is a market structure characterized by (1) many small sellers, (2) a differentiated product, and (3) easy market entry and exit. Given these characteristics, firms in monopolistic competition have a negligible effect on the market price.

·Oligopoly is a market structure characterized by (1) few sellers, (2) a homogeneous or a differentiated product, and (3) difficult market entry.

·Oligopolies are mutually interdependent because an action by one firm may cause a reaction from other firms.

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5. THE GLOBAL ECONOMY

5.1. INTERNATIONAL TRADE

DISCOVERING CONNECTIONS

Consider the clothes and shoes you are wearing, and those you wore last weekend. Where were they made? Try to recall the meals you’ve eaten in the last 24 hours. How much of the food came from abroad? If you have them, where do your car, television, stereo, camera, watch, and so on come from? Where was the last DVD or CD you bought manufactured?

Can you even imagine living in a country that did not import anything, where only locally produced food and textiles and products were available?

READING

Text 1

As you read the text, focus on the difference between absolute and comparative advantages and pay attention to trade restrictions.

International Trade

Since ancient times people have strived to expand their trading as far as technology allowed.

Today, container ships laden with cars and machines and Boeing 747s shuttled with fresh fruit, fresh New Zealand lamb, and French cheeses ply the sea and air routes, carrying billions of dollars worth of goods and services. Trade in goods such as food, raw materials, and manufactured goods is known as visible exports and visible imports. Trade in services such as banking, insurance, and tourism is known as invisible exports or invisible imports. So why do people go to great lengths to trade with those in other nations?

International trade is a form of specialization. Sri Lanka specializes in tea because it has an appropriate climate and soil, and skilled growers and packers. The principle is just the same as individual specialization: Jill specializes in math teaching because she is good at math and at dealing with people, Jack specializes in dentistry because he understands the biology and is deft with his hands. Of course, it is important for both that there is demand for what they are offering.

Economic theory distinguishes between absolute advantage and comparative advantage.

Absolute advantage is the ability ofa country to produce a good using fewer resources than another country.

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Comparative advantage is a bit harder to understand, but more important for trade. The principle of comparative advantage is a central concept in international trade theory which holds that a country or a region should specialize in the production and export of those goods and services that it can produce relatively more efficiently than other goods and services, and import those goods and services in which it has a comparative disadvantage.

Comparative advantage is the ability of a country to produce a good at a lower opportunity cost than another country.Comparative advantage refers to the relative opportunity costs between countries of producing the same goods. World output and consumption are maximised when each country specialises in producing and trading goods for which it has a comparative advantage.

The majority of economists believe that international trade should be based on comparative advantage and free trade. Free trade is a system which allows certain countries to buy and sell goods from each other without any financial restrictions. In practice, despite the advice of economists, every nation protects its own domestic producers to some degree from foreign competition. Behind these barriers to trade are people whose jobs and income are threatened, so they clamour to the government for protectionism. Protectionism is the government’s use of embargoes, tariffs, quotas, and other restrictions to protect domestic producers from foreign competition.

Embargoes are the strongest limit on trade. An embargo is a law that bars trade with another country. For example, the United States and other nations in the world imposed an arms embargo on Iraq in response to Iraq’s invasion of Kuwait in 1990.

Tariffs are the most popular and visible measures used to discourage trade. A tariff is a tax on an import. Tariffs are also called customs duties. Historically, these provided revenue to governments when taxes were not easily collected from other sources. Modern tariffs are usually imposed for a different reason: to shut out (or add to the price of) certain imports in order to protect home producers from foreign competition. An obvious example is the protectionist policy used by European Union for many agricultural products. The current US tariff code specifies tariffs on nearly 70 percent of U.S. imports. A tariff can be based on weight, volume, or number of units.

Another way to limit foreign competition is to impose a quota. A quota is a limit on the quantity of a good that may be imported in a given time period. For example, the United States might allow 10 million tons of sugar to be imported over a one-year period. Once this quantity is reached, no more sugar can be imported for the year. Quotas can limit imports from all foreign suppliers or from specific countries. Like all barriers to trade, quotas invite other nations to retaliate with more measures to restrict trade. With tariffs, it is impos-

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sible to know the quantity that will be imported, because prices might be elastic. With quotas, governments can set a limit to imports. Yet unlike tariffs, quotas provide no revenue for the government.

Vocabulary Focus

Ex. 1.

export: /’ekspo:t/ or /ik’spo:t/?

1.Look at these words. Where is the stress when the word is used as a noun and when it is a verb?

2. Fill the gaps with one of the words in its correct form.

a.Scotland _____ a lot of its food from other countries. Its _____ includes oil, beef, and whisky.

b.I’m very pleased with my English. I’m making a lot of _____.

c.Ministers are worried. There has been an _____ in the number of unemployed.

d.But the number of crimes has _____, so that’s good news.

e.How dare you call me a liar and a cheat! What an _____!

f.There was a demonstration yesterday. People were _____ about blood sports.

g.People usually buy CDs these days. Not many people buy _____ any more.

h.Don’t touch the video! I’m _____ a film.

i.Britain _____ about 75% of its own oil.

Ex. 2. Match the following common collocations with their Russian equivalents:

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on

Ex. 3. Match the words in column A with their synonyms in column B.

Ex. 4. There is a logical connection among three of the four words in each of the following groups. Which is the odd one out, and why?

1)absolute advantage – barriers – comparative advantage – free trade

2)balance – deficit – dumping – surplus

3)banking – insurance – merchandise – tourism

4)comparative advantage – protectionism – quotas – tariffs

5)non-tariff barriers – norms – quotas – taxes

6)barter – import substitution – infant industries – tariff barriers

7)liberalize – protect – subsidize – substitute

Ex. 5. Match each headword on the left with a set of examples on the right.

Ex. 6. Complete the following sentences, use the prompts below:

1.________________ means that each nation specializes in a product for which its opportunity cost is lower in terms of the production of another product and then nations trade.

2.________________ benefits a nation as a whole but individuals may lose jobs and incomes from the competition from foreign goods and services.

3.A government’s use of embargoes, tariffs, quotas, and other methods to protect particular domestic industries by imposing barriers that reduce imports is called ___________.

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4.A (an) ________________ prohibits the import or export of particular goods and a (an) __________________ discourages imports by making them more expensive. These trade barriers often result primarily from domestic groups that exert political pressure to gain from these barriers.

5.The _________________ is a summary bookkeeping record of all the international transactions a country makes during a year. It is divided into different accounts including the current account, the capital account and the statistical discrepancy.

6.The __________________ measures only goods (not services) that a nation exports and imports. It is the most widely reported and largest part of the current account.

7.A (an) _________________ is the price of one nation’s currency in terms of another nation’s currency. The intersection of the supply and demand curves for dollars determines the number of units of a foreign currency per dollar.

8.A __________________ is a limit on the quantity of a good that may be imported in a given time period.

Words for reference: comparative advantage; free trade; protectionism; embargo; tariff; balance of payments; balance of trade; exchange rate; quota.

Comprehension

Ex. 1. Based on your understanding of the text, are the following TRUE or FALSE? Explain why.

1.International trade is a form of specialization.

2.Comparative advantage is the ability of a country to produce a good using fewer resources than another country.

3.Protectionism is the government’s use of embargoes, tariffs, quotas, and other restrictions to protect domestic producers from foreign competition.

4.Tariffs are the strongest limit on trade.

5.Embargoes are the most popular and visible measures used to discourage trade.

6.Tariffs provide no revenue for the government.

Ex. 2. Find in the text the answers to the following questions.

1.What is the basis for trade between nations? Why does international trade bring gains to all countries?

2.What’s the difference between absolute advantage and comparative advantage? Which of them is more important for international trade? Why?

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